Unless you work in finance (and sometimes even if you do), it can be difficult to understand all the ins and outs of banking. There are plenty of misconceptions surrounding banks and their services and it’s easy to be misled by false information. We are here to help inform you and offer five banking terms so you can better understand what you are getting yourself into.
Getting a new mortgage or auto loan to replace the original is called refinancing. Refinancing allows a borrower to get a better interest term and rate to save money. In the long run refinancing could benefit both your pockets and the value of your home or vehicle.
Annual Percentage Yield (APY)
Is the real rate of return earned on a savings deposit or investment taking into account the amazing effect of compounding interest. When looking to put your money into a savings account, you want to make sure you are getting a high APY in order to make the most of the money you are saving. Certificates of deposit (CDs) tend to have the best interest rates.
Annual Percentage Rate (APR)
The cost of credit on a yearly basis, expressed as a percentage. When it comes to your APR, you want the lowest rate possible, such as like on your auto loan, credit card, mortgage or even a home equity loan. A low APR allows for you to have more of your payment go to the actual loan and not the interest accumulating.
When you apply for a new credit card with a lower interest rate, then move your balance to it from the old credit card to save money. Balance transfers are most common with members who want to get a lower interest rate on a store credit card in the hopes of paying it off faster. Alltru offers a no balance transfer fee, which helps you save even more money in the long run.
A fixed rate loan has the same interest rate for the entire loan period. Fixed rates allow you to stay consistent with what you are paying and know exactly how long it will take to pay off your loan and how much interest you will pay over the course of time.
It is our goal to provide you with any information that can help you live a better life financially and knowing the common banking terms will help you feel more confident. The more you know the better you are financial when it comes to your money and investing it with the credit union. We are always here to help you every step of the way.
Until Next Time,